January 7, 2009 4:35PM # $1.2 Trillion Deficit By [Chris Edwards](https://www.cato.org/people/chris-edwards) --- SHARE Before 1987, Americans only needed to understand the word “billion” to get a handle on federal budget numbers. Today, the word “trillion” is the needed metric in budget discussions. The [Congressional Budget Office released an update ](http://www.cbo.gov)to its budget projections today, and the figures show that the federal deficit for fiscal 2009 will be $1.2 trillion. That deficit represents 8.3 percent of GDP, the highest share of the economy since World War II. Thus, a burden the size of 8 percent of all income earned in the United States this year is being thrust onto tomorrow’s taxpayers. Here are some other observations on the data: - If Congress passes a so-called stimulus package in coming weeks of say $800 billion, the 2009 deficit will top $2 trillion. Even the biggest critics of Washington’s spendthrift ways never thought they would see a number like that. - The CBO shows federal spending in 2009 will be about $3.54 trillion. This number includes the spending effect of TARP and the federal takeover of Fannie and Freddie. But let’s consider those to be extraordinary items and take them out for a minute. And let’s add in $24 billion more for Iraq this year, as CBO indicates. The result is that — even aside the financial bailouts — federal spending would be about $3.165 trillion this year. That figure is up 6.3 percent over 2008, and up 70 percent over 2001, Bush’s first year in office. - The CBO puts the deficit in fiscal 2010 at $703 billion. But that low-balls Iraq costs again, and doesn’t include extension of the AMT and other minor expiring tax provisions. Add those in, and the deficit in 2010 will be at least $829 billion. Keynesian economists believe that government budget deficits “stimulate” the economy during a recession. But we’ve got $1.2 trillion this year and $800 billion next year of deficit “stimulus” without any special “stimulus” package. Isn’t that enough? If I get up in the morning and drink five cups of coffee and that doesn’t stimulate me, I don’t go and drink another five. I’d recognize my addiction problem and start reforming my bad habits. Federal policymakers should do the same. ##### Related Tags [Tax and Budget Policy](https://www.cato.org/tax-budget-policy), [Government and Politics](https://www.cato.org/government-politics) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).